Gold is shining brighter these days, amid ongoing inflation fears and a weaker US Dollar. The precious metal is a popular inflation hedge, and as concerns that rising inflation could force central banks to tighten monetary policy are unlikely to ease in the near-term, it could have more room to the upside.
XAU/USD cleared a significant hurdle with its breakout above $1850 and the 200 DMA. A test of the $1875 resistance level is likely to follow soon, and clear breakout above it could pave the way for an extension of the rally towards the $1958/1965 resistance zone. The RSI on the hourly charts is hinting at slightly overbought conditions, suggesting we could see a pullback towards $1850 before the rally resumes.
A sudden spike in US yields could lead to a reversal in the US Dollar and give the currency a major boost. Traders should therefore also keep an eye on the Gold cross pairs, such as XAU/EUR, which could perform better in such a scenario. XAU/EUR broke above $1518 resistance today, and could soon test the 200 DMA at $1560. A clear breakout above that level might pave the way for an extension of the rally towards $1591.
GBP bulls remain optimistic as the re-opening of the UK economy continues. The vaccination program in the country has made significant progress in the past few months and, so far, the government has been sticking to its reopening plan despite concerns about new COVID-19 variants.
GBP/USD bounced off the psychologically important 1.40 support level and has resumed its rally since then. A test of the 2021 high at 1.4235 seems only a matter of time. The currency pair has been in a steady uptrend since March, and the Daily RSI is not signaling overbought conditions yet.
To the downside, imminent support is seen at 1.4077, followed by 1.40.
Meanwhile, the GBP/JPY rally is looking increasingly overstretched. The negative RSI divergence on the Daily chart is suggesting we may see a correction before the uptrend continues.
To the downside, support is seen at 153.15. A breakout below that level is likely to push the currency pair towards the 152.43 level, and the rising trendline from the late April low is another potential form of support.
Equity markets remain volatile and technology stocks are particularly in the spotlight. Inflation fears have triggered a rotation out of highly-valued growth stocks into value and cyclical stocks. While the broad market has been performing relatively well, USTECH has seen wild price swings, and this could persist in the near-term.
The index found strong support at the 61.8% Fibonacci level of the March-April rally at 12,928 points. However, the resistance zone between 13,387 and 13,456 points has once again capped the topside. Traders will be looking for a clear breakout above 13,528 points as a confirmation that the uptrend is resuming.
To the downside, support can be expected at 13,189 points, followed by the major support zone between 12,924 and 12,970 points.
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Today’s key charts focus on oil, where the recent rally has stalled amidst talk of a lift in sanctions and speculation of a production boost.